Does your company own the article, manual or handbook that it paid a contractor to write for the company? Does your company own the photographs that it paid a photographer to take? Does your company own the critical software that your company paid a programmer to create for the company? The answers might surprise you, and could have an important impact on your company’s future.
In the United States, the person who creates a work generally is considered to be the author of that work for purposes of copyright protection. However, U.S. copyright law makes an exception to this rule for “works made for hire” (also known as “works for hire”). If a work is “made for hire,” then the person or company that commissioned the work, and not the work’s author, is considered to be the author for purposes of copyright ownership. Classification of a work as “made for hire” not only determines the initial ownership of the copyright to the work, but also the copyright’s duration, renewal rights to the copyright, rights to terminate the copyright, and rights to import certain goods bearing the copyright.
If a regular, salaried employee of a company creates a software program for the company within the scope of his or her employment, the software will be a “work for hire” and will be owned by the employer, and not by the programmer. Likewise, a magazine article written by a journalist that is employed by a news magazine will be owned by the magazine, and not by the journalist. The work of regular, salaried employees are “works for hire,” owned by the company. But, what happens if the software programmer is an independent contractor, and not an employee of the company, or if the journalist is a freelance contractor instead of an employed reporter? This is where companies can be in for an unpleasant surprise. A work ordered or commissioned from a non-employee contractor is not “owned” by the company that ordered or commissioned the work, unless: 1) the parties expressly agreed in a signed, written instrument that the work would be considered a work for hire, and 2) the work was specially ordered or commissioned for use: (a) as a contribution to a collective work, (b) as a part of a motion picture or other audiovisual work, (c) as a translation, (d) as a supplementary work, (e) as a compilation, (f) as an instructional text, (g) as a test, (h) as answer material for a test, or (i) as an atlas.
Unless the parties agree in a signed writing that the independent contractor’s work will be a work for hire, and the work falls within one of the above exceptions, then the independent contractor will own the work – not the company that paid for the work. If not mindful of these requirements, a company that commissions a contractor to create a software program may find that the software it bought and paid for is not owned by the company. Likewise, a news magazine could find itself not holding the copyright to an article written by a non-employee freelance journalist, or to photographs taken by a non-employee freelance photographer.
The question of whether the copyright to a work is held by the person who authored the work, or by the company that paid for the work, can have far-reaching impact on a company’s fortunes. This critical question often comes down to whether the author of the work is considered an “employee” for these purposes, and the term “employee” is different for copyright purposes than the common understanding of the term. To determine whether the author of a work is an “employee” for purposes of copyright law, one must look at a number of factors:
- Control of the employee over the work. (Did the employer determine how the work was done? Was the work done at the employer’s location? Did the employer provide the equipment or means to create the work?)
- Control by the employer over the author. (Did the “employer” control the author’s schedule in creating the work? Did the “employer” have the right to have the author perform other assignments? Did the “employer” determine the method of payment? Did the “employer” have the right to hire the author’s assistants?)
- Status and conduct of the employer. (Is the “employer” in the business of producing such works? Did the “employer” provide the employee with benefits, and/or withhold tax from the author’s payment?)
These factors are not exhaustive, and not all of the elements have to line up in favor of “employee” or “contractor.” However, supervision and control over creation of the work alone does not decide the issue.
What should a company do to ensure that it ends up owning the software, written text, photographs, artwork, or other creative works that it pays third parties to produce? One thing a company can do is limit work on such items exclusively to regular, salaried employees that create works within the scope of their employment. All employees who may create such works should have written employment agreements that expressly recite that creation of the works are within the scope of their employment, and therefore are works for hire. To the extent that that company chooses to commission any form of creative work from non-employees, it is critical that the company require contractors to execute well-drafted, work-for-hire agreements, waiving and assigning all copyrights and rights of authorship, before allowing a contractor to commence work on a project. These work-for-hire agreements need to be drafted by an experienced attorney to ensure that they protect the company’s claim to ownership of the resulting work. In addition, the company should consult with an attorney to ensure that the contractor’s anticipated work fits within one of the statutory “work for hire” exceptions.
For more information, contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or one in our Business Planning & Transactions Practice Group.
